RECENT ECONOMIC REPORTS

 JULY INDONESIAN MINING UPDATE:

FOCUS ON STATE MINING COMPANIES

SUMMARY: A state-owned Indonesian mining company, PT Aneka Tambang (PT AnTam), reported a 64-percent increase in net income. After a significant drop in 1995-1997, Indonesia's bauxite production grew slightly in 2000. PT AnTam forecasts a 2004 start of bauxite production at Tayan, West Kalimantan at 1.0 million MT per year. The company also hopes to establish a US $150 million joint venture with foreign investors for a 300,000 MT/year alumina processing plant. Indonesia’s two ferronickel-smelting plants in Pomalaa, Sulawesi increased production by 9.7 percent in 2000 to 10,111 MT of nickel content in 2000. In dollar terms, nickel ore exports in 2000 rose 98.0 percent, although export quantities were stable and production dropped 10 percent. End summary.

Aneka Tambang 2000 Net Profit Grows

PT Aneka Tambang (PT AnTam), a mining company owned 65 percent by the Government and 35 percent by the public, reported a Rp 383.2 billion net income in 2000 (US $45 million at the 2000 average exchange rate of Rp 8500/$). Significant increases in the market price of its core products (nickel ore, ferronickel, gold, silver and bauxite), coupled with higher selling volumes and a stronger dollar, contributed to the 64-percent increase over the 1999 Rp 234.3 billion net income. PT AnTam earned US $174.6 million in foreign exchange, a US $54.8 million increase compared to 1999. The company allocated Rp 683.4 billion for investment in 2001, including Rp 405 billion for the construction of a third ferronickel plant (see para 7), Rp 139 billion for maintenance and upkeep, and Rp 63 billion for exploration.

2000 Bauxite Production Up 

After a significant drop in 1995-1997, Indonesia's bauxite production grew slightly in 2000 to 1.15 million MT from 1.12 million MT in 1999. Export volumes also rose to 1.24 million MT from 1.03 million MT in response to higher demand, particularly from Japan. Export earnings increased to US $13.3 million from US $11.9 million in 1999. PT AnTam, the only company mining bauxite in Indonesia, has operated open pit mines in Kijang, Bintan Island for more than 60 years. Bintan’s exportable grade bauxite reserves will be depleted in the next two to three years, with 2.98 million MT of bauxite reserves left. Bintan Island’s designation as a tourist and a water catchment area has limited further exploration or possibilities for expanding mine operations.

Tayan Bauxite Mine to Open in 2004

PT AnTam forecasts a 2004 start of bauxite production at Tayan, West Kalimantan at 1.0 million MT per year. PT. Alocmin, an affiliate of Aluminum Company of the United States, previously held an exploration contract for Tayan. The mine is estimated to hold bauxite reserves of 200 million MT, with an estimated mine life of 100 years. PT AnTam plans to develop the Tayan mine project together with foreign investors, given the large scale of investment required.

The company also hopes to establish a US $150 million joint venture with foreign investors for a 300,000 MT/year alumina processing plant. In November 2000, the Indonesian government approved in principle PT AnTam’s application for an 8th generation contract of work for a Tayan Chemical Grade Alumina project covering an area of 12,620 hectares. PT AnTam considers the establishment of an alumina processing plant as essential to the exploitation of large quantities of low-grade reserves with aluminum content below 40 percent in Bintan island (about 78 million MT) and in West Kalimantan (about 800 million MT). Original plans called for a plant processing 1.75 million MT of non-export grade bauxite per year to produce 600,000 MT of sandy grade alumina per annum, of which 450,000 MT would be supplied to the Asahan aluminum smelter.

2000 Ferronickel Production Up

Indonesia’s two ferronickel smelting plants (FeNi I and II) in Pomalaa, Sulawesi increased production by 9.7 percent in 2000 to 10,111 MT of nickel content in 2000 from 9,221 MT in 1999. FeNi I produced 5,115 MT and FeNi II produced 4,996 MT. The smelters produced high-carbon ferronickel (21% carbon) and low-carbon ferronickel (19% carbon) in the form of both shots and ingots. PT AnTam shipped 10,189 MT (by nickel content) of ferronickel valued at US $83.8 million in 2000. PT AnTam holds long-term contracts to sell ferronickel to companies in Germany, Belgium and Japan.

The company delayed the construction of a US $220 million ferronickel smelter unit III (FeNi III) in Halmahera Island of Maluku by two years as it continued to seek financing for the project. FeNi III is designed to produce 13,000 MT of ferronickel annually, which will bring the company’s annual production capacity to 24,000 MT by 2004. Tessag Industries-Anlagen GmbH of Germany won the tender for the construction of FeNi III. The project is supported by long-term ferronickel sales contracts with reliable international buyers, KruppThyssenNirosta of Germany (8,000 MT/year) and Posco Ltd. Of Korea (7,000 MT/year).

2000 Nickel Ore Production Declined

In 2000, Indonesia’s nickel ore production from three PT AnTam nickel mines declined 10 percent to 3.04 million MT from 3.24 million MT in 1999. The quantity of nickel ore export remained stable at 2.04 million MT. In dollar terms, nickel ore exports in 2000 rose 98.0 percent to US $39.2 million from US $19.8 million in 1999. The company shipped its entire output of higher-grade saprolite nickel ore (2.4 percent nickel content) to Pacific Metals Co., Sumitomo Metal Mining Co. Ltd., and Nipppon Yakin Kogyo Co. Ltd., all located in Japan. The lower grade limonite ore (1.5-1.6 percent nickel content) was shipped to Queensland Nickel Pty Ltd of Australia.

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